Disney to Buy Online-Video Network Maker Studios

In its latest bet on a hot segment of the digital media industry, Walt Disney Co. agreed to acquire online video producer and distributor Maker Studios for $500 million in cash.

The deal, which has been expected for several weeks, will give Disney a strong foothold in the burgeoning but financially uncertain market for channels on Google Inc.’s YouTube.

The acquisition terms call for Disney to pay an additional $450 million if Maker meets certain performance targets.

Among the most successful of a new wave of “multichannel networks,” Maker boasts 55,000 channels, 380 million subscribers and 5.5 billion video views a month on YouTube. Its audience is largely made up of the young, digital-first demographic watching less television and other traditional media.

Disney plans to use Maker staff and tools to help put its existing content online, as well as to mine Maker’s many channels for programs and personalities to exploit through the conglomerate’s other businesses, said executive vice president of corporate strategy Kevin Mayer. Its ability to do so may be limited, however, by the fact that Maker has partnerships with the producers of much of its most popular content, but doesn’t own it.

Although Disney has been a leader among major media companies in putting content on the Internet and mobile devices, its technology acquisitions have led to mixed results. Its $563 million purchase of social gaming company Playdom Inc. in 2010 came not long before that sector fizzled and several videogame production studios it bought have since shut down.

Club Penguin, the virtual world Disney acquired in 2007 for $350 million, didn’t do well enough to earn performance-based compensation of the same amount.

“We haven’t bought something like this before,” said Mr. Mayer. “If I’m going to make a bet on the future, it’s short form video and younger audiences.”

Like its competitors such as Fullscreen, Maker is highly dependent on the business decisions of YouTube, which takes a share of advertising revenue on its channels.

“We believe the presence of Maker, especially as part of the Walt Disney Company, is a good thing for YouTube and vice versa,” said Mr. Mayer.

Maker is based in Culver City, Calif., about 15 miles from Disney’s Burbank, Calif., headquarters. Its most popular personalities include videogamer Felix Kjellberg, a.k.a “PewDiePie,” and music video parody producer Bart Baker.

In a unique setup, Maker won’t be part of Disney’s interactive-media division or any of its other business units. Instead, its chief executive, Ynon Kreiz, will report directly to Disney Chief Financial Officer Jay Rasulo.

The acquisition is by far the biggest move by a major media company in the YouTube video space. Last year, DreamWorks Animation SKG Inc. purchased Maker competitors AwesomenessTV for an initial payment of $33 million, plus performance-based compensation of as much as $117 million. Earlier this month, Time Warner Inc.’s Warner Bros. led an $18 million round of funding in Machinima, a YouTube network aimed at videogame fans.

The acquisition is expected to be “mildly dilutive” to Disney earnings through its fiscal year that ends in September of 2017, Mr. Mayer said.

Disney shares closed up less than 1% Monday at $79.98 before the acquisition was announced.